Page 6 - MEOG Week 25

MEOG Commentary MEOG

Dust settles after

OPEC production cuts

The outcome of the recent OPEC+ meeting to extend oil
production cuts is well-known but in the period since that

meeting OPEC has been busy with important ancillary issues.

oPeC TWO linked topics feature prominently: ensur- uncertain.
ing that countries match their promises and lev- Saudi Arabia, the UAE, Kuwait and Oman
ying additional cuts on those who failed to meet had agreed to implement an additional volun-
What: their quota in May. tary 1.2 million bpd cut for June as a show of
OPEC has levied Saudi Arabia has been at the helm of these good faith but have said they do not plan to con-
additional production initiatives, giving producers who are failing to tinue those in July.
cuts on some producing perform on their agreed output cuts just days to
countries. show how they will toe the line on oil production heated meeting
curbs. No details were given of the exact schedule of
Why: Last month, the Organization of Petroleum cuts for Iraq and Kazakhstan to make up for their
Several countries missed Exporting Countries and its allies fell short of excesses in May. The deal calls for the compensa-
their May quotas. their 9.7 million-barrel-a-day cuts target by 1.26 tory cuts to be made over July-September. Min-
million. That volume will be compensated in full isters for both countries could not be reached for
What next: in the coming months. comment.
A full report is anticipated Two of the miscreants, Iraq and Kazakhstan Iraq, frequently criticized by its OPEC+
from OPEC this week. have detailed to the OPEC+ alliance how they counterparts for its unwillingness to comply,
will implement deeper output curbs in the com- produced nearly 600,000 bpd over its alloca-
ing months to make good on their quota viola- tion in May, according to Platts’ latest survey of
tions in May. But other members that went over OPEC output.
their caps have yet to submit their plans, drawing Newly installed oil minister Ihsan Ismaael
the ire of Saudi energy minister Prince Abdu- said on June 15 that crude exports in June would
laziz bin Salman, who has made compliance a be slashed some 780,000 bpd, or almost a quar-
pet issue. ter, in an effort to comply with the deal.
They had until June 22 to do so, according to An Iraqi source said that June and July pro-
a committee tasked with monitoring the OPEC+ duction would be at the same levels, but did not
production cut accord. Delegates have previ- provide any figures.
ously identified Iraq, Kazakhstan, Nigeria and Kazakh energy minister Nurlan Nogayev
Angola as the biggest offenders. had said on June 9 that his country pumped 3.13
“The committee stressed that the attainment million barrels over its quota over May 1-12 and
of 100% conformity from all participating coun- was committed to the terms of the deal. Nige-
tries is not only fair and equitable, but vital for ria was 288,000 bpd in excess of its quota, while
the ongoing and timely rebalancing efforts and Angola was 90,000 bpd over, according to the
helping deliver a sustainable oil market stabil- Platts survey.
ity,” the OPEC+ Joint Ministerial Monitoring In all, nine out of the 23 OPEC+ members
Committee (JMMC) said after its June 18 online had compliance levels of below 90% for the
meeting. month, based on Platts calculations.
Overall compliance with the cuts was 87% for The mixed performance and lack of plans for
May, the committee said. compensatory cuts caused the JMMC meeting to
OPEC and 10 allies are in the midst of a 9.7 get heated at times, with Prince Abdulaziz scold-
million bpd production cut agreement aimed ing the feet-dragging members, sources involved
at enabling the oil market’s recovery from the in the talks said. Prince Abdulaziz is a co-chair of
coronavirus pandemic. The cuts are set to run the JMMC with Novak.
through July and then scale back to 7.7 million “he did show some anger today, one OPEC+
bpd through the rest of the year, with the JMMC official said, asking not to be identified, due to
meeting monthly to adjust the quotas as needed. the sensitivity of the discussions.
No decisions were made on August cut lev- “OPEC+ is taking its task very seriously,” Ben
els, delegates said, with the market outlook still Luckock, co-head of oil trading at commodities

P6 www. NEWSBASE .com Week 25 24•June•2020